Decentralized Identifiers (DIDs). An introduction to the future of digital identity

Did you know that account takeover (ATOs) resulted in fraudsters stealing more than $11.4 billion last year and that account origination fraud is predicted to cause $5 billion in losses by 2024?

Reuters reports that over the last three years, the FBI has received 33% more reports of cyber fraud. Between August’22 and November’22, the number of daily phishing emails, as reported, increased from 400,000 to 800,000 per day. Fraudsters using fake IDs have also done more “bust-out” scams on financial services companies.

Everybody has been a part of the global wave of digital disruption, from individuals to businesses to governments. In the digital economy, digital identity is a fundamental facilitator for corporate activities. In a world where data is proliferating across a wide range of devices and network boundaries are getting harder to define, digital identity is becoming an essential part of the security ecosystem. The next step, then, in the development of digital identification capabilities is decentralized identity. The World Wide Web Consortium (W3C) has acknowledged Decentralized Identifiers (DIDs) v1.0 as an officially recognized Web standard. This new type of verified identity won’t need a central database, and it will give people and businesses more control over their online information while also making it safer and more private.

What are decentralized identifiers (DIDs)?

With “decentralized identity,” a new type of identity management, users can take care of their own online identities without having to rely on a single service provider. Modern digital identification technologies now make it possible to check someone’s ID without having to keep the data stored in one place, especially on external servers owned by Google, Apple, Meta, or Amazon.

Decentralized identifiers are assets that are issued and controlled by each individual. Peer-to-peer networks or distributed ledgers (blockchains) are used to store these decentralized identifiers. DIDs are also globally unique, easily deployable, and cryptographically verified. A few of the key features of DIDs are:

• They are a form of international identification that is anonymous and made up of a string of numbers and letters that is kept on the blockchain.
• They allow the owner to keep stronghold control through cryptography.
• DIDs can have more than one private key and public key pair.
• DIDs do not include personal information or wallet data.
• It is possible to verify DIDs anywhere, at any time, and they allow for private and secure interactions between two parties.

DIDs combined with attestations pave the way for decentralized digital identity.

Decentralized identifiers and attestations are the main building blocks of decentralized identity. Digital identity is the notion that identity-related documentation should really be self-controlled, private, and portable. Attestations, or verifiable credentials in the context of decentralized identification, are tamper-resistant, cryptographically verifiable statements made by the issuer. Each attestation that an entity (like a company) provides has its own DID. DIDs are maintained on the blockchain, so anybody may cross-check the DID of the issuer to confirm the accuracy of an attestation. Attestations, in the typical sense, are self-controlled and verifiable because of decentralized identifiers. The holder always retains evidence of the authenticity and provenance of the attestation, even in cases where the issuer is no longer present.

There are quite a few benefits to this decentralized identity!

• Increased individual control over identifying information: it is now possible to verify decentralized IDs and attestations without relying on centralized authorities or outside services.
• A smooth, trustless, and privacy-protecting manner of managing and confirming user identification is made possible by decentralized identity systems.
• With the help of blockchain technology, DIDs make it easier for people to trust each other and offer cryptographic guarantees to prove that attestations are true.
• Identity data will now be transferable, thanks to decentralized identity. Users can share attestations and identifiers they hold in their mobile wallet with whomever they choose. Attestations and identities issued by decentralized organizations are not stored in the issuing organization’s database.
• For new zero-knowledge technologies, decentralized identification will allow people to demonstrate that they are the sole owners of something without disclosing what that stuff is. For applications like voting, this may prove to be a potent method to combine privacy with trust.

Some decentralized identity terminologies to note

There are multiple components that drive the entire architecture of a decentralized identification experience. Let’s take a look at some key terms associated with DID architectures:

1. Self-sovereign identity:  This refers to the digital phenomenon that is based on the idea that each person should be in charge of their own identification without the interference of administrative bodies.

2. Verifiable credentials: These are declarations made regarding a topic by the issuer. Verifiable credentials have the issuer’s digital signature on them.

3. Issuer: The issuer is the organization that provides holders with verified credentials. Issuers may be either a person or a company, however, they are most often a government agency or business.

4. Holder: As the name suggests, the holder is the one who holds the verified credentials.. Users are normally holders, although they may also be companies 

5. Verifier: A verifier is an organization that validates authentic credentials in order to render services to an individual.

6. Verifiable presentations: Provable credentials, attestations, or other similar assets are forms of verifiable presentations. These may include all the data that a validator is looking for in a single package and are validated by the holder.

7. Decentralized Identifier (DID): It is an identifier that represents and authenticates any entity. “Digital cards” are a representation of authenticated credentials that users accumulate over time and retain as a part of their user agent or identity hub.

8.   dPKI: DIDs can be registered and checked up with the accompanying public keys of the DID and its information in a dPKI database. dKPI is a decentralized public key infrastructure that is often implemented through an immutable blockchain or ledger

9. Universal resolver: This is an identification resolver that utilizes DID drivers to function with any decentralized identifier system. When a particular DID value is supplied, a universal resolver’s job is to provide a DID document with DID information.

Concluding Thoughts

The lack of a decentralized identification infrastructure is one of the main barriers to companies using blockchain right now. After all, it doesn’t make much sense to have a decentralized blockchain network if every identity on it still depends on centralized control. Decentralized identities may open up whole new economic options and give people greater autonomy over their identities and personal information. IT managers need encryption key exchange protocols to build trust between two corporate units in the modern world. Even though it’s a big change from how authentication and access management have always thought about identification, the account-based identification paradigm and decentralized identity may work together. Adding a decentralized identity could help a lot with transactions that require a high level of trust.

We’ll talk more about how DIDs work, how developers are using them to build better solutions, how they can be used, and what stops DIDs from being widely used. Keep an eye on this space to read more about them.